With the awareness surrounding environment sustainability and the aim to support development and promotion of clean technology, Bank of America Corporation (BAC) announced the Catalytic Finance Initiative. With this, BofA will invest around $10 billion in high-impact clean energy projects. The Wall Street bank targets to attract more institutional investors by reducing investment risk through creation of innovative financing structures.
Through the Catalytic Finance Initiative, BofA will be able to work with partner organizations and would deploy at least $10 billion of incremental capital in renewable energy, energy efficiency and energy access investments. With its solid global network of clients and strong relationships with institutional investors, BofA foresees increased investments in a lower carbon future.
As part of the recent initiative, the bank targets mainly finance opportunities, which are on large scale and uses de-risking structures. Such de-risking tools include first loss and mezzanine tranches, risk guarantees and new insurance products, which are designed jointly by development finance institutions (DFIs), insurance providers, foundations and institutional investors. Therefore, such a move will make clean energy investments more manageable especially in emerging markets.
Further, BofA aims to aid smaller, energy access opportunities through innovative catalytic first-loss capital and other forms of credit support.
Group vice president and special ambassador for Climate Change, World Bank Group – Rachel Kyte appreciates BofA’s initiative of creating a broader range of financing vehicles and expects other investment banks to come forward and speed up private sector investments into renewable energy, energy efficiency and energy access.
This is not the first initiative taken by BofA towards environmental business activities. The bank has invested $31.7 billion to low-carbon and other such activities since 2007.
Notably, in Jun 2012, together with the Rio+20 United Nations Conference on Sustainable Development, BofA announced a 10-year environmental business target worth $50 billion to develop lower-carbon economic solutions with the help of lending, equipment finance, capital markets and advisory activities, carbon finance and investment advice and solutions for clients, globally. The initiative followed the announcement of multi-year environmental business initial investment worth $20 billion in 2007, which was completed four years before the stipulated time.
Through such initiatives, BofA is likely to alter the dynamics of clean energy projects, in addition to increasing investments for the same.
BofA currently carries a Zacks Rank #3 (Hold). However, some better-ranked banking stocks include Wells Fargo & Company (WFC), JPMorgan Chase & Co. (JPM) and JMP Group Inc. (JMP). All these carry a Zacks Rank #2 (Buy).
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